UBS Highlights Potential in the German Electricity Market
The UBS has emphasized the attractiveness of three providers in the German electricity market, which offer significant potential for future price increases. This recommendation is based on several key factors that significantly influence the German energy supply sector.
Background and Influencing Factors
- Grid Expansion: The expansion of electricity grids is a top priority in Germany, supported by streamlined planning and approval processes from the Federal Network Agency, to address the projected electricity consumption of 750 terawatt-hours by 2030.
- Climate Policy and Renewable Energy: Decarbonization and the expansion of renewable energy sources are crucial for the development of suppliers, with investments needing to be grid-friendly to ensure supply reliability.
- Economic Framework Conditions: Decisions between overhead lines and underground cables, as well as optimized offshore wind power planning, are essential for cost efficiency.
Recommended Providers
- E.on: With significant investments in electricity distribution networks and a secured financing plan, E.on is recommended by UBS with a price target of 16 euros.
- Elia: Due to strong profit growth and undervaluation, Elia is perceived as an attractive value with a price target of 101 euros.
- RWE: RWE is favored among electricity producers, with a price target of 42 euros. In contrast, Uniper holds a sell recommendation with a price target of 30 euros.
The recommended focus on these companies is based on the assumption that they will benefit from investments in energy infrastructure and favorable regulatory conditions.